Statement by the 2010 Article IV Consultation Mission to Belize

Press Release No. 10/273
July 1, 2010

Mario Garza, chief of the International Monetary Fund mission to Belize, issued the following statement today in Belmopan:

“An IMF mission conducted discussions on the 2010 Article IV consultation with Belize during June 21-July 1. The mission met with Prime Minister Dean Barrow, the government’s economic team, the private sector, and civil society. The mission thanks the authorities for their warm hospitality and the cordial policy discussions, which focused on the economic outlook for 2010 and the medium term, and the government’s macroeconomic strategy.

“Economic activity stagnated in 2009, as a result of the global slowdown and the lingering effects from the floods in 2008. Growth has resumed since late 2009, but the recovery is still narrowly based, while inflation appears to be picking up somewhat, driven by the rise in fuel prices. For 2010, the mission expects growth to resume modestly, and export prices and tourist receipts to recover slightly, allowing foreign reserves to stabilize at just over three months of imports of goods and services. Despite the recent tax revenue actions, the overall fiscal deficit is likely to widen in FY2010/11, owing largely to upward pressure on primary current spending and increased investment, while the public debt would remain high. The overall banking system appears liquid and well capitalized, but the mission is concerned about the rise in nonperforming loans (NPLs).

“The consultation discussions centered on strategies to promote sustainable growth and reduce poverty. The mission underscored the need to strengthen fiscal and external buffers to deal with future shocks. Building on the recent revenue measures and in order to put the public debt-to-GDP ratio on a firm downward path, the primary fiscal surplus would need to be raised significantly over the medium term, by restraining the growth in current spending; prioritizing investment; and placing the pension system on a strong and sustainable footing. The mission also encouraged the authorities to press ahead with current plans to improve tax and customs administration.

“In the monetary and banking area, the mission welcomed recent reforms to improve the conduct of monetary policy, by relying more on market-based monetary instruments and further reducing non-remunerated reserve requirements. It encouraged the authorities to advance these reforms, which should help reduce intermediation spreads, while maintaining a disciplined monetary stance. The mission also advised the authorities to remain vigilant in their supervision of domestic and offshore banks, ensure that sufficient provisioning is made to cover NPLs, and further strengthen prudential regulations.

“Upon its return to Washington, DC, the mission will prepare a staff report that is scheduled to be discussed by the IMF Executive Board in early September. It is expected that the staff report would be published shortly thereafter.”